The Thunderbird School of Global Management recently asked FiREapps CEO (and Thunderbird graduate) Wolfgang Koester to contribute an article exploring foreign exchange risk for the school’s Knowledge Network – an online forum for faculty, alumni and students.
The school asked Koester to share his thoughts on creating a currency-sensitive culture within an organization. Doing so, Koester explained, generates “currency awareness” within organizations helping stakeholders across an enterprise better manage foreign exchange (FX) risk.
Three Steps to Managing FX
“Being currency aware isn’t just for an organization’s executive team, although that is usually the best place to begin,” wrote Koester. “At FiREapps, we typically introduce the concept to corporate leaders who then help that awareness permeate through the entire organization.”
Koester said this usually follows a three-step process:
- Corporate leaders are given actionable steps to reduce the impact FX volatility has on their bottom line. This helps them gain full visibility into their exposures.
- FiREapps then identifies a company’s largest risks (which are not necessarily their most significant exposures).
- FiREapps next helps them improve the accuracy of their corporate cash flow exposures, which validates the relatively small cost of managing currency risk compared to the more significant risks that come from failing to manage it.
“By following these steps, key stakeholders become sensitive to the very real impacts FX can have on corporate returns,” Koester continued. “This process allows them to manage exposures to the point that the impact to their balance sheets is less than a penny EPS – and impacts to cash flow immaterial (relative to EBIDTA).”
You can read Koester’s full article here.
Is your organization currency aware? Surprisingly, many currency-sensitive corporations continue to rely on manual FX processes that are inefficient and subject to error. If your company still manages currency risk via manual processes and spreadsheets, now is to time to automate.
Join FiREapps and Treasury and Risk magazine for an informative webinar detailing the many benefits that come from adopting a fully automated FX program. Find out how easy it is to automate and reduce costs, improve efficiencies and reduce risk.